Westlake Services' first securitization of the year pooling a larger percentage of loans to riskier borrowers than its previous transaction, completed in October.
The sponsor began marketing $450 million of subprime auto loan-backed securities this week via Westlake Auto Receivables Trust 2016-1, according to DBRS.
Westlake extends loans under three main program types: Standard, Platinum and Gold. The Standard program is for customers with FICO scores below 600; the Gold program is for customers with FICOs 600 to 699; and the Platinum program is for customers with FICOs of 700 and above.
The Standard program does not have a minimum FICO, and it is available to consumers with open and discharged bankruptcies and accepts hard-to-prove incomes, among other things. Westlake’s Gold program is meant for customers with established credit history, regardless of vehicle mileage or age. The Gold program offers loan terms up to 72 months and annual percentage rates (APRs) as low as 12.99%. However, similar to the Standard program, customers with hard-to-prove incomes, open or discharged bankruptcies and prior repossessions can qualify for the Gold program.
The loans backing Westlake Auto Receivables Trust 2016-1 have a weighted average FICO of 601, down slightly from 604 for the 2015-3 transaction; this is attributable to a lower percentage of loans to borrowers from its Gold and Platinum programs: 40.02% vs 42.89% in the 2015-3 transaction.
The change in the collateral mix has led DBRS to increase its base-case expectation for cumulative net losses to 12.00% for the 2016-1 transaction, vs 11.50% for the 2015-3 transaction.
The class A1 notes will be rated ‘R-1’ and are due Jan 16, 2017 and two tranches of class A-2 notes will be rated ‘AAA’ and are scheduled to mature Jan. 15, 2019. Initial Class A credit support amounts to 35.75%, which will include subordination (30.75%), a reserve account (1.00%, funded at inception, non-declining) and OC (4.00%).
At the subordinate level the trust will offer ‘AA’ rated class B notes, ‘A’ rated the class C notes and ‘BB’ rated class D notes that are all scheduled to mature on Sept. 15, 2021. The class B benefits from 28.75% credit support; the class C notes benefit from 18.5% credit support and the class D notes benefit from 10.25% credit support.
Westlake is a privately held company that is primarily owned by Don Hanky and Marubeni Corporation. The sponsor originates loans that finance used cars, typically with high mileage via a network of independent and franchise dealers. As of November 2015, the two business channels account for 64.7% and 35.3% for Independent and Franchise, respectively.
The deal is expected to close on Jan. 21.